The Insurance Information and Ratemaking Forum of Asia (IIRFA) will be holding its annual conclave in Hyderabad in May 2016. We speak to Mr R Raghavan, CEO, Insurance Information Bureau of India (IIB), the event’s host on the purpose of holding this event in India and what the market can learn from it.

By Jimmy John

Worldwide, there are insurance bureaus working to cater to the needs of insurers, regulators and policyholders. In Asia, a number of insurance analytics organisations have come together to form the IIRFA.

The objective of this forum is to enable insurance analytics bodies in Asia to meet, interact and exchange information on the state of insurance analytics in their respective countries thereby striving for excellence in data analytics.

“IIB, by hosting the event, is keen to highlight the importance of data, its quality, analytics and measures being taken by more developed markets to achieve greater efficiency through their effective deployment, particularly to the players in the Indian insurance industry,” said Mr Raghavan. He added that the event will also assist IIRFA members to familiarise themselves with the Indian insurance market characteristics.

Key discussion points

The proposed two themes for the conclave are Impact of analytics on insurance markets and Financial inclusion.

“We plan to bring the experiences of other member countries as a showcase for the Indian market and explain the takeaways from the success in the Indian financial services in respect of financial inclusion,” said Mr Raghavan.

The programme will include sessions on data analytics and ratemaking, covering different classes of insurance as well as fraud control and Big Data analytics and their profound impact. There will also be sessions on financial inclusion, the significant role of technology in dealing with large numbers to be enrolled and the application of technology in fraud management in insurance and other financial services and also a session on disaster management and disaster financing through market securities.

Need for credible data

The insurance business worldwide is driven by data which is essential for developing new products, for quantifying risks, price setting and management of hazards.

“One of the major gaps in the Indian insurance market, be it life or general, is the lack of credible data and in the absence of this data, meaningful analytics is not possible for insurers to gain useful insights on underwriting practices to be followed, the patterns in claims and most importantly, the control of fraud,” he said.

In comparison, developed markets in US, Europe and some markets in the ASEAN region are decades ahead in insurance analytics and therefore the insurers there are able to operate more efficiently.

So he hopes that given the low take- up of analytics in India, hosting such an event will enable Indian players to look into adopting analytics and its benefits.

Big Data and analytics for the Indian market

Big Data in today’s world is inevitable and all aspects of our life are gradually getting guided and governed by analytics using Big Data.

“Insurance cannot be an exception but the challenge lies in acquiring quality data and using the same in a meaningful manner.”

He added that while there are various sources for data acquisition, cleaning the data acquired and appropriately mapping various sets of data to each other is a real challenge.

Giving an example of an “Indian citizen”, he said that at any given time, there are multiple databases within the same ecosystem, carrying various attributes mutually exclusively, of the same subject matter.

Whilst individual Id issuers may have solid security reasons for maintaining their own series of Ids for their constituents, the Edward Snowdens of the world would make a mockery of them. “The need of the hour therefore is ‘swap and map’ so everyone gets a 360-degree view of the subject matter and can apply the information to his area of operation,” said Mr Raghavan.

Fraud analytics for insurance frauds

Fraud detection and control is a specialised discipline and in developed markets, the fraud detection agencies are well structured and are supported by a robust legal and prosecution framework.

In India, insurance fraud is largely the burden of the insurers, who are victims themselves and thus have the onus of detection and control. Any legal pursuit would have to follow the extant civil or criminal procedure, which are usually long drawn, defeating the efficacy of the control aspect.

“All the efforts mentioned above also suffer from one genetic malaise and this is they are all ‘ex-post facto’ and for effective fraud control, preventive action arising out of ‘predictive’ capability is essential and this is where ‘fraud analytics’ kicks in,” said Mr Raghavan.

He mentioned that based on archival data as well as interplay of sophisticated predictive techniques, fraudulent practices can be detected in advance. “Pre-empting the occurrence itself or by steering clear of fraudsters’ attempts, nipping them in the bud would be the right approach,” he said.